Coffee Falls in Robusta Rout While Starbucks Cup Costs $1.50: Commodities

Farmers from Vietnam to Brazil will supply a record robusta crop in the marketing year that begins next month, extending a slump in coffee futures that spurred Kraft Foods Inc. (KFT) and J.M. Smucker Co. to cut prices.
Production will rise 5.4 percent to 3.29 million metric tons (54.9 million 60-kilogram bags) in the 2011-12 season, the U.S. Department of Agriculture estimates. Vietnam and Brazil, the biggest producers, will reap the most beans ever. Robusta traded on the NYSE Liffe exchange in London fell 26 percent since March, and will drop another 5 percent to $1,884 a metric ton by Dec. 31, according to the mean in a Bloomberg survey of 16 brokers, traders and analysts.
Robusta, the second most-consumed coffee after arabica, is reversing a rally that more than doubled prices in the 12 months ended in March as shortages emerged. That was part of a global surge in food prices that the United Nations estimates reached a record in February. U.S. food-price inflation will be as much as 3.5 percent next year, compared with as much as 4 percent this year, the USDA estimates.
“Vietnam will have a record crop next season and supply will be readily available for roasters, which had to rely on stocks after the country ran out of beans earlier this year,” said Keith Flury, a commodities analyst at Rabobank International in London. “Increased availability will pressure prices, helping ease costs for roasters and consumers.”
Robusta futures reached a three-year high of $2,672 in March as an unusually long rainy season in Indonesia cut output by 12 percent to 7.95 million bags. While production in the world’s third-largest grower probably dropped another 16 percent to 6.66 million bags in the harvest that began in April, the decline will be more than offset by the biggest suppliers.

Vietnam Harvest

Output in Brazil, which started its 2011-12 harvest in July, will rise 14 percent to 14.5 million bags, the USDA estimates. Vietnam’s harvest, which begins next month, will yield 9.8 percent more at 19.9 million bags, the data show. Futures traders are already anticipating the surge in supply of the beans used mostly in instant coffee, with robusta for November delivery trading at $1,932 on Sept. 26.
Prices for arabica, favored by Starbucks Corp. (SBUX), dropped 19 percent to $2.335 a pound on ICE Futures U.S. in New York since Sept. 1, also reacting to traders’ expectations of increasing supply. Brazil will harvest a record crop next year, according to Volcafe, a unit of ED&F Man Holdings Ltd. The USDA is forecasting the biggest Central American supply in a decade.

Green Coffee

The flood of beans will add to European coffee stockpiles that already rose 35 percent to 13.66 million bags this year as Vietnamese farmers accelerated exports to take advantage of a three-year high in prices, data from the European Coffee Federation show. The figure includes robusta and arabica. Stockpiles of green, or unroasted, coffee in U.S. warehouses monitored by the Green Coffee Association of New York jumped 19 percent to almost 4.74 million bags this year.
The anticipated price slump may be curbed if the Vietnam Coffee and Cocoa Association implements a plan to stockpile beans to avoid domestic shortages, said Kona Haque, an analyst at Macquarie Group Ltd. in London. Vietnam exporters agreed this month to stockpile 420,000 tons of beans for 2011-12, Luong Van Tu, chairman of the association, said yesterday.
Macquarie predicts robusta will average $1,919 in 2012, about 2 percent more than estimated in the Bloomberg survey. Robusta averaged $1,836 since NYSE Liffe started trading the 10- ton contract in 2008.

Marketing Year

Global robusta production will exceed demand by almost 4.1 million bags in the coming season, according to ABN Amro Bank NV and VM Group. Macquarie anticipates a surplus of 2.5 million bags, the most in four years, compared with a shortfall of about 700,000 bags in the current marketing year.
Robusta output in Ivory Coast, the fifth-biggest grower, will rise almost 10 percent to 2.3 million bags, according to the USDA. Production will also expand in Guinea, Madagascar, Laos,Malaysia, Tanzania and Togo, according to the Washington- based government department.
While stockpiles are rising and futures slumping, consumer prices may take longer to react because roasters and retailers need to work through inventories accumulated at higher costs.
Starbucks, the world’s largest coffee-shop operator, bought most of the coffee it needs for the year ending in September 2012, Troy Alstead, the Seattle-based company’s chief financial officer, said in a conference call in July. A 12-ounce brewed coffee from Starbucks in the U.S. ranges from $1.50 to $1.75, according to Alan Hilowitz, a spokesman for the company.

Retail Prices

Kraft, which owns the Maxwell House brand, reduced prices for some products by 6 percent last month after raising them three times in 2010, the Northfield, Illinois-based company said Aug. 23. Smucker, which owns the Folgers brand, reduced costs for the majority of its coffee products sold in U.S. by an average 6 percent in August, the Orrville, Ohio-based company said in a statement on Aug. 16.
U.S. retail prices for roasted coffee averaged almost $3.91 a pound last year, the most since 1997, according to data compiled by the International Coffee Organization in London.
“A fall in prices won’t feed through to us immediately because we already have stocks,” said Bryan Stockley, the managing director of Coburg Coffee Co., a London-based roasting company founded almost a half century ago. “It may take six months or more.”

We'll Need 170,000 Worker says BHP 

BHP BILLITON has predicted Australia's resources industry will need an extra 170,000 workers in the next five years, underlining the job bonanza set to hit mining states.
Forecasts from the mining giant say the resources boom will create 90,000 continuing jobs by 2016, and demand for temporary construction workers will peak at 80,000 in 2014.
In a sign of the growing risk of skills shortages, BHP's prediction is almost 60 per cent higher than a previous government forecast used to develop policies for meeting skills demand.
A federal taskforce into resources employment last year said 61,500 mining jobs would be created by 2015 and the construction workforce would peak at 45,000.
Most of the job growth is forecast in Western Australia and Queensland, where companies are investing in coal, iron ore and liquefied natural gas projects.
The Minister for Resources, Martin Ferguson, said the gap between BHP's forecast and the government's could be explained by the new investment approved in the past year.
Skills shortages were expected to peak in 2014 or 2015, he said, but the challenge was ''not a bad problem to have''.

Gold Bulls & Silver Fools Lose $29 Billion in September

He’s back!
It was not my intent to be tip-toeing in the blogoshpere this soon. I really thought my next blog post would be introducing the “grand” old lady of song. But the story of this post is just too big to pass up. Besides, you honored me by voting this among your top blogs on Barry Ritholtz’ web site, TheBigPicture, (see here) so I needed to throw you a meaty bone.
Well, this one is really meaty. Get ready to enjoy. The story behind this post will be in the history books.
You read the headline correctly, during the month of September Gold bulls and Silver fools lost a grand total of $29 billion — for those of you who cannot spell, that is $29,000,000,000!
The table below tells the story.
Source of table: Factor LLC Research
That’s a lot of money when one is not talking about some “no-earnings, no-income, just another average idea” internet start-up.
But the story does not end there. There are three other story lines.
Story line #1 — the money is gone and is not coming back.